State aid: Commission opens two in-depth inquiries into Italian support measures in energy sector in Sardinia

The European Commission has opened two separate in-depth investigations under EU state aid rules regarding public support measures in the region of Sulcis-Iglesiente in Sardinia, Italy. Firstly, the Commission will investigate the compliance with state aid rules of support measures amounting to over €400 million granted by Italy since 1998 in favour of Carbosulcis, the company exploiting the Nuraxi Figus coal mine. Secondly, the Commission will verify whether subsidies that Italy intends to grant for the 'Sulcis project', i.e. the construction of a coal-fired plant fitted with a Carbon Capture and Storage Demonstration (CCS) Section, are in line with EU state aid rules. The opening of in-depth inquiries gives interested third parties an opportunity to comment on the measures. It does not prejudge the outcome of the investigation.

Between 1998 and 2010, Carbosulcis SpA received public support of at least €405 million in the form of investment and operating aid as well as support aimed at training, R&D and environmental purposes. All measures were granted without prior notification to the Commission, in breach of EU state aid rules. The Commission will now assess whether this public support was granted in line with the various EU rules specifying which categories of aid are allowed and under what conditions. The Commission invites Italy to quickly submit the necessary information to allow it to carry out such an assessment.

As concerns the 'Sulcis project', Italy submitted that it mainly aims at increasing the security of electricity supply of Sardinia and that it supports industrial research and fosters development in a depressed area. While the Commission acknowledges the importance of developing carbon capture technology, it will investigate whether the planned coal-fired power plant is best suited to address the alleged objective of security of supply in Sardinia at the lowest cost for the State and whether the envisaged aid is kept to the minimum necessary to achieve this objective. Moreover, the Commission will check whether the project may indirectly subsidise the operation of the local coal mine, which is in principle prohibited under current EU rules.

Background

In 2006, following a complaint, the Commission became aware of Italy's intention to subsidise the operation of a coal mine, the Nuraxi-Figus mine, and the production of electricity obtained from this indigenous coal in Sardinia. The Commission investigated in parallel past subsidies granted to the mine and the envisaged subsidies for the integrated Sulcis project, which included the management of the very same mine and the construction of a power plant fired with indigenous coal for at least 50% of its requirements.

In 2008, the Commission opened an in-depth investigation into the Sulcis project as it had concerns that a guaranteed off-take price might provide an undue competitive advantage to the plant operator over competitors who have to work without such subsidies. Moreover, local energy-intensive users would have been able to purchase electricity at preferential tariffs, in breach of state aid rules (see case C36/2008). Following the opening of this investigation, Italy withdrew the project and, in 2011, notified a modified project including a CCS Demonstration Section.

The modified project no longer contains preferential tariffs for local energy-intensive users. However, it still plans to subsidise the plant operator in the form of guaranteed off-take tariffs over 20 years following the entry into operation of the full project. The aid amount would correspond to the difference between the guaranteed tariffs and the market prices over the lifetime of the power plant. Moreover, the project seems to imply the obligation to use local brown coal.

The public support received by Carbosulcis SpA between 1998 and 2010 consisted of investment and operating aid as well as support aimed at training, R&D and environmental purposes.

State aid control aims to ensure that companies that receive aid do not benefit from an undue economic advantage distorting competition in the EU Single Market. State aid may be allowed where it benefits the common interest without unduly distorting competition. In particular, EU rules allow state aid for R&D and innovation, training, and for environmental protection provided that certain conditions are met.

The non-confidential version of the decisions will be published in the Official Journal of the EU and made available respectively under the case numbers SA.20867 for the aid to Carbosulcis and SA.33424 for the planned aid to the Sulcis Project in the State Aid Register on the competition website once any confidential issues have been resolved. New publications of State aid decisions in the internet and in the Official Journal are listed in the State Aid Weekly e-News.